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Trade

Japan, India and Australia aim to steer supply chains around China

Three nations call on Asian neighbors to join 'free and fair' initiative

Ships at Tokyo's Oi container wharf. Japan wants to combine its supply chain cooperation with ASEAN and the new initiative with India and Australia.

NEW DELHI -- Japan, India and Australia agreed Tuesday to launch an initiative to achieve supply chain resilience in the Indo-Pacific region, in an apparent bid to reduce trade dependence on China -- a major trading partner for all three nations.

In an online meeting, India's commerce and industry minister Piyush Goyal and Japanese and Australian counterparts Hiroshi Kajiyama and Simon Birmingham raised the need for a free, fair and predictable trade environment and called on like-minded nations in the region to take part. The ministers said in a joint statement they instructed officials to work out the details for a launch later this year.

The development comes amid escalating Sino-American tensions, a standoff on the China-India border, and the COVID-19 pandemic. Many nations dependent on China for trade have suffered from supply disruptions, highlighting the need for diversification.

Shamshad Ahmad Khan, an expert on Indo-Japanese relations and visiting associate fellow at the New Delhi-based Institute of Chinese Studies, told the Nikkei Asian Review the three countries have "deep apprehensions" about China's expansionist behavior.

Australia's relations with Beijing are fraying, while both India and Japan have unresolved boundary disputes with China that have escalated recently. "Therefore, it is quite natural that they have adopted this strategy to keep China in check," Khan said.

However, the tripartite move is likely to have a limited impact.

"We have seen in the past that India and Japan have signed various [free trade agreements] and lowered the tariffs with the partner countries [while denying] the same privilege to China. But it did not achieve the intended objective. Goods continued to flow from China disturbing the trade balance," Khan said.

Japan's Minister of Economy, Trade and Industry Hiroshi Kajiyama participates the trilateral negotiations online on Sept. 1. (Photo courtesy of the ministry)

The ministers, the statement said, recognized the pressing need for regional cooperation on building a resilient supply chain in the Indo-Pacific.

They "reaffirmed their determination to take a lead in delivering a free, fair, inclusive, non-discriminatory, transparent, predictable and stable trade and investment environment and in keeping their markets open," it said. "In light of the COVID-19 crisis and the recent global-scale changes in the economic and technological landscape, the Ministers underscored the necessity and potential to enhance the resiliency of supply chains in the Indo-Pacific region."

The three countries called on other countries in the region who share the same vision to join the initiative.

Japan has already launched cooperation with the Association of Southeast Asian Nations over supply chains and is expected to explore ways to combine the two initiatives.

Japan, Australia and India, along with the U.S., form the Quadrilateral Security Dialogue, or "Quad" -- an informal strategic forum that Beijing has reservations over for its potential to contain China in the Indo-Pacific.

U.S. Deputy Secretary of State Stephen Biegun said that the Quad is preparing to hold a meeting later this year.

"There's going to be a meeting of the Quad, a ministerial meeting with the Quad this fall in Delhi -- that's the intention anyway -- in person," he told the U.S.-India Strategic Partnership Forum on Monday.

The Quad represents "four extraordinarily solid democracies," Biegun said. "That's critically important because while interests will drive all our nations to make choices in the policy sphere in the Indo-Pacific and beyond, shared values that complement shared interests create a solid foundation."

"All four of us, of course, are Pacific powers," he added.

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